Click on the Photo for Enlarged Version. Much easier to read!

With last Friday mornings report, the Bureau of Labor Statistics released its Non-Farm Payrolls report. More commonly called “the jobs report”. Depending on the strength — or weakness — of the data, mortgage rates will change. As expected, the numbers were not as good as we hoped for and money started to flow into the “safe haven” of mortgage bonds.

This transfer of money from the more risky stock market into the bond market, typically will result in better rates. And for the most part, this is happening. But, over the past few weeks of trading we are seeing the big banks giving less and less of the improvements back to their mortgage clients. Yet, when we have sudden spikes and rates increase (see red columns in chart above), the banks are quick to re-price for the worse and cut their exposure to the increased costs to carry that rate for the borrower (when it’s locked).

I have a few clients who are floating their locks now as they get near their close of escrow dates (within 30 days) and I am suggesting that they lock the rate today. Because we are in a overbought position, the likelihood that rates get better is slim, compared to the possibility that banks will quickly increase rates if the market swings in the wrong direction.

As a direct lender in Sacramento, I have the ability to renegotiate with our investor desk after a rate is locked, if we see a marked improvement in mortgage backed securities. So, if we do see another precipitous drop in rates, then we have the opportunity to possibly renegotiate the rate down – It’s the best of both worlds! So, at a minimum, lock that loan and protect your great rate!

Based on the technical’s today, I am suggesting my clients lock these wonderfully low and historic rates, and be very happy they are in this position.